The battle is on for one of Iraq's major oil refineries

Smoke rises from a oil refinery in Baiji, north of Baghdad, in this picture taken through the windscreen of a car, June 19, 2014. Iraqi government forces battled Sunni rebels for control of the country's biggest refinery on Thursday as Prime Minister Nuri al-Maliki waited for a US response to an appeal for air strikes to beat back the threat to Baghdad.

Credit:

Reuters

The Iraqi government is asking for US airstrikes to help stop the advance of the Sunni militant group ISIS.

Player utilities

Those insurgents have taken control of much of northern Iraq. They're also threatening to attack Baghdad and they're reportedly getting ready for a new assault on Iraq's biggest oil refinery. ISIS fighters came close to taking control of the site after a first attack. That refinery could well prove a key prize in the battle for Iraq.

But it's not a prize the Iraqi government will hand over without a fight.

Ben Lando, editor of the Iraq Oil Report, says the shutdown of the refinery is already having a disruptive effect. "We're seeing miles-long lines for the gas station here in Erbil, the capital of the Kurdistan region, and across northern parts of the country, in all these places the Beiji refinery used to service. The refinery's been offline for about a week now. It's definitely taking a toll on domestic supplies and access to gasoline."

The Beiji refinery accounts for about 320,000 barrels a day of refining capacity, or about a third of Iraq's overall refining capacity. But Lando stresses the current conflict at the refinery has no present impact on Iraq's oil production or its oil fields, including the ones being developed big international companies. Iraq's oil fields are scattered across the entire country, but most are in the south, near the city of Basra, home to 80 percent of Iraq's oil production. And 100 percent of Iraq's oil exports go through Basra Province out to the Persian Gulf.

That oil is the furthest away from the fighting as you can get. There are also oil fields being developed in the autonomous Kurdistan region in the very far north of Iraq. There's a fairly large Kurdish military presence to protect those resources.

Even if insurgents were able to seize and control the Beiji refinery, Lando says they would have to find a way to supply it with oil. "The refinery is worthless, in many respects, if there is not oil [piped] to it. They [ISIS] do have control over some areas where there are oil fields and they could connect it by pipeline to the refinery, but I don't think the Iraqi government would allow that to happen. Either they control it or nobody will have it."

Lando didn't detail what military strategy the government might deploy to ensure that happens, but, he adds, "I don't know if they're worried as much as they are angry about how things are going down. This may mean spending $4 to $7 billion to build another refinery, and that's the way it's looking right now."

Reports of fighting at the refinery are limited and the extent of damage isn't clear. Satellite imagery shows smoke coming from the site. But Lando says, so far, it appears any damage may be limited to some storage tanks and some fuel runoff that's caught fire. But if fighting escalates, Lando says "this could cause massive damage. It took seven years to build the facility and it may be ruined in a week."